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A taxing question in neighboring W.Va.

A taxing question in neighboring W.Va.

Just
across the state border, 40 or so minutes away from Pittsburgh, an interesting public policy
matter is unfolding.

And, as per
usual, it’s filled with the usual machinations of those who believe government
is the public’s master, existing to promote dependency and to command the
economy.

The West
Virginia Legislature is considering a commonsense measure that would repeal the
Mountain State’s personal property tax on manufacturing machinery, equipment
and inventory.

But just this
past weekend, Democrat state Sen. Bill Ihlenfeld penned an op-ed in a local
newspaper that doesn’t tell the whole story.

In his zeal
to scare West Virginia workers into believing that an important business tax
cut will lead to “more robots and fewer West Virginia workers,” Ihlenfeld left
out a few pertinent facts.

The senator
says the repeal will lead to an estimated $18 million loss in tax revenue to
four Northern Panhandle counties – used to fund, in part, such things as fire
departments, animal shelters and senior services — and it could help to escalate the state’s
projected budget deficit.

But as The
Tax Foundation noted last year, West Virginia’s tax structure isn’t exactly
conducive to business. “Outmoded” and “uncompetitive” are two words the
foundation used.

And
the kind of taxes now up for repeal only do one thing – “discourage investment,
since new, undepreciated equipment has a higher taxable value than older
equipment, even if its continued use is inefficient, and since it may be
possible to locate some new capital investment in other states,” the foundation
concluded.

Additionally,
it reminds that extending such taxes to inventory “imposes high compliance
costs for businesses and can create strong incentives for companies to locate
inventory in states where they can avoid these harmful taxes.”

“West
Virginia is one of only 10 states which still tax inventory,” the foundation
says.

The
bottom line is that such taxes “force companies to make decisions about
production and distribution based on tax implications rather than sound
business practices.”

“They
also impose high compliance costs, since these taxes are what is known as
‘taxpayer active.’ That means that a company must track the acquisition price
and depreciation of each piece of property, and the value and location of all
inventory, along with the relevant assessment ratios and millages, and
applicable credits, abatements, and refunds, to calculate and remit the tax,”
The Tax Foundation further states.

Sen. Ihlenfeld, citing a study of a
similar tax repeal in Ohio, fears that a West Virginia version of the repeal
would result in what that study said were firms deciding “to invest in capital
rather than hiring new workers when they receive this tax benefit.”

It’s sheer pandering gobbledygook, a
smokescreen designed to give cover for a regimen of taxation that only can
retard economic growth. God forbid that a company invest in capital, which is
key to companies remaining competitive and, yes, helping to create more
jobs.

Goodness gracious, we can’t have
privately generated economic growth that supplants the sultans of dependence,
the government almsgivers, now can we.

Indeed, as Ihlenfeld also wrote, “the
relationship between tax cuts and economic growth is complicated.”

That’s especially true when the other
side of the equation – the power of free markets over those handcuffed by
onerous taxation and excessive regulation — is given such short shrift.

Colin McNickle is
communications and marketing director at the Allegheny Institute for Public
Policy (cmcnickle@alleghenyinstitute.org).